Insight

Buy and Maintain Credit – Investing for the long-term

21 June 2022
Ben Gutteridge
Ben Gutteridge
Portfolio Manager - Multi-Asset Strategies
Luke Greenwood
Luke Greenwood
Fund Manager
Buy and Maintain Credit – Investing for the long-term

In this podcast, Ben Gutteridge, Invesco Solutions Investment Director, Luke Greenwood, Co-head of Global IG Credit and Derek Steeden, Solutions Portfolio Manager, discuss the importance of a Buy and Maintain credit allocation for Defined Benefit (DB) pension schemes by providing predictability of income to enable cashflow matching.

In an informative 20-minute conversation, Luke and Derek outline how a Buy and Maintain credit strategy differs from a typical credit portfolio, the impact of widening spreads and higher rates, and how the strategy fits into an overall DB portfolio.

Summarising what to look for in a Buy and Maintain manager, Luke and Derek go on to discuss key areas such as Environmental, Social and Governance integration, experience and customisation. 

Key topics covered in this podcast:

  • 01:03     How does a Buy and Maintain credit strategy differ from a typical credit portfolio?
  • 04:39     Does a period of spread widening represent an opportunity?
  • 06:01     How do you manage the challenge of higher interest rates?
  • 07:37     How much turnover is involved with this strategy?
  • 09:05     How do Environmental, Social and Governance considerations feature in the approach?
  • 12:56     How does investment grade credit fit into a broader DB portfolio?
  • 16:10     How do you handle currency management within this strategy?
  • 19:01     What should investors look for in a Buy and Maintain credit manager?

 

Useful resources

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Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

    Debt instruments are exposed to credit risk which is the ability of the borrower to repay the interest and capital on the redemption date. Changes in interest rates will result in fluctuations in value. It may be difficult to buy or sell certain debt instruments in stressed market conditions. Consequently the price obtained when selling such securities may be lower than under normal market conditions.

    The strategy will invest in derivatives (complex instruments) which will result in leverage and may result in large fluctuations in value. The strategy may be exposed to the risk of the borrower defaulting on its obligation to return the securities at the end of the loan period and of being unable to sell the collateral provided to it if the borrower defaults.

    This strategy enters into transactions which expose it to the risk of bankruptcy, or other types of default, by the counterparties to those transactions. The lack of common standards may result in different approaches to setting and achieving ESG objectives. In addition, the respect of the ESG criteria may cause the strategy to forego certain investment opportunities. The use of ESG criteria may also result in the strategy being concentrated in companies with ESG focus and its value may be more volatile than that of a strategy having a more diverse portfolio of investments.

Important information

  • Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.

    This podcast is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.